Much has been written of the dramatic drop in the Debt/GDP multiplier, or Keynesian accelerator, over the last few years that shows the marginal utility of adding more debt produces less and less growth (and in fact can become a drag). More debt to solve too much debt seems put to bed as a solution except in the surreal world of central bankers and politicians. Well, with all the hoop-la today for the 'peek' over Dow 13000 and our discussion of the nominal versus real 'value' of the Dow as central banks of the world have printed $7tn into existence in the last few years, we thought an examination of the marginal utility of central bank printing would be useful. The depressing truth is that, using Gold as a proxy for central bank ebullience, the impact of implicit devaluation (or explicit printing) by central banks is having a smaller and smaller impact on stock market (asset) prices. Since the lows in March 2009, the impact of central bank intervention on the Dow has rapidly diminished from over 20 Dow points per $1 Gold move to only 2 Dow points per $1 Gold move in the last few months. What is dramatically clear is that investors are losing 'value' even as they see their brokerage statements rise and while Gas prices will inevitably slap reality into their faces, perhaps just as the Debt/GDP multiplier signaled the Keynesian Endgame, then the Gold/Dow multiplier signals the Currency-Wars Endgame - or alternatively, Central Banks will have to go exponential in their extreme experimentation to fulfill equity-holder's hopes and dreams as they approach their event horizon.

This chart plots the rolling rate of change of the Dow (in points) for each $1 shift in Gold. If we assume that Gold is a useful proxy for central bank exuberance and extreme experimentation (which seems defensible given this discussion and chart), then the rapidly diminishing scale of the oscillations clearly indicates that the impact of central bank money printing is decelerating dramatically.

This seems to suggest that in order to maintain the desired devaluation-inspired rise in asset prices, Central Banks will have to go exponential to escape the linear and reflexive impacts of their peers and competitors in the central bank world - or perhaps we really are once again hitting the asymptote of Keynesian ridicule. We are sure the CBs of the world will invent a new mutually-assured-destruction Depression-inspired reason for the step-shift in balance sheet expansion required to fuel asset prices and in the meantime, we'll hold our gold.

Perhaps a clearer analogy (inspired by Andy Y) is that central banks are approaching their event horizon and while one cannot see the Black Hole (inferring its position from the Hawking radiation spewing from it), perhaps a growing cacophony from Bernanke/Draghi spewing forth is the 'sign' that we are about to go over the edge.

If a credit event occurs on the Greek bailout then the central banks are going to have open season to double their recent $7 trillion in expansion that Tyler noted earlier because we are going to finally have the deflationary "correction." Good discussion here on how the Greek bailout can be viewed as disarming a bomb:

I wish this was the case but I'm not sure it is....Gold and other PM's should clearly be a lot higher in my estimation, and ZH has said this as well. So, this article....I just don't know. Doesn't seem to hold much water in my estimation.

GDP is also manipulated upwards, which would tend to cancel golds downward manipulation in this case - Hard to tell though. Best to stick to numbers that are as hard as possible, maybe oil consumption instead of GDP, and oil price instead of gold prices would give a more accurate picture.

just called cnbc to tell them how irresponsible they are and told them about the BBC interview report and they hung up on me....they dont want to air anything bad what a fucking joke...everyone should call

They should concentrate on moving gold up so it can perform its task of backing the currency and countering debt.

If they insist on sitting on gold, they will get shrinking asset prices and collapsing debt deflation until the money supply is backed by gold at a low price. If they allow gold to rise until the dollar value of our gold reserve matches our money supply and debt, everything will stabilize at higher prices. The idea that paper money exists outside of its gold backing is a fantasy I am tired of watching morons try to push on the world. Messing with gold prices destroys the currency and that destroys the economy. 50 years of proof show we have been in decline since we inflated for war, then went off the gold standard, then attempted to monkey with derivatives and interventions to control prices and steer the economy. The Treasury and the Fed took the hard way and failed miserably. They have wrecked this country because they want paper currency to serve themselves instead of hard money to serve the economy.

Newton, when tasked with coming up with a way to detect and thwart the shaving of silver from the edges of coins, solved this problem by his invention of the reeded edge coin. Technically, there has been no good reason for American dimes and quarters to have reeded edges since 1965.

In Newton's days, the punishment for debasing the money supply was hanging.

How about reinstating that statute?

Agreed. Americans would be well served by the reinstatement of the Coinage Act of 1792 for that very reason, as well as for the design of the coins and free coinage of gold and silver.

In general relativity, an event horizon is a boundary in spacetime beyond which events cannot affect an outside observer. In layman's terms it is defined as "the point of no return" i.e. the point at which the gravitational pull becomes so great as to make escape impossible. The most common case of an event horizon is that surrounding a black hole. Light emitted from beyond the horizon can never reach the observer. Likewise, any object approaching the horizon from the observer's side appears to slow down and never quite pass through the horizon, with its image becoming more and more redshifted as time elapses. The traveling object, however, experiences no strange effects and does, in fact, pass through the horizon in a finite amount of proper time.

The black hole analogy is a good one. As the economy approaches the event horizon, time feels normal but from the perspective of the central bankers time is becoming ever elongated and the calamity is put off...

So the relatavistic view from the starship "Printing Press" is great but that doesn't help the rest of us being stretched to infinite lengths!